Farm Credit’s Net Income Up 25%

The Farm Credit System reported that combined net income increased by $202 million or 25.2% to $1.004 billion for the quarter ended March 31, 2011, as compared with combined net income of $802 million for the same period of the prior year.

“We are extremely pleased with first quarter 2011 results,” said Jamie B. Stewart, Jr., President and CEO of the Federal Farm Credit Banks Funding Corporation. “The high level of earnings reflects the lower-rate funding environment over the past year and the generally favorable agricultural economic conditions in the United States.”

The increase in combined net income between the first-quarter periods resulted from an increase in net interest income of $155 million and a decrease in the provision for loan losses of $63 million, partially offset by an increase in net non-interest expense of $10 million and an increase in the provision for income taxes of $6 million.

Net interest income was $1.569 billion for the first quarter of 2011, as compared with $1.414 billion for the first quarter of the prior year. The increase in net interest income between the periods primarily resulted from a higher level of average earning assets and lower debt costs.

Since March 31, 2010, the banks called debt totaling $60.2 billion, of which $7.1 billion was called during the first quarter of 2011, and were able to lower their cost of funds relative to their assets, which did not reprice as quickly. Over time, as interest rates change and as assets prepay or reprice in a manner more consistent with historical experience, the positive impact on the net interest spread will likely diminish.

The System recognized provisions for loan losses of $108 million for the first quarter of 2011, as compared with $171 million recognized during the first quarter of 2010. ◆